LITERATURE REVIEW
The Concept and Forms of integration
In everyday usage the word "integration" denotes the bringing together of parts into a whole. In the economic literature the term "economic integration" does not have such a dear-cut meaning. Some authors include social integration in the concept, others subsume different forms of international cooperation under this heading, and the argument has also been advanced that the mere existence of trade relations between independent national economics is a sign of integration. We propose to define economic integration as a process and as a state of affairs. Regarded as a process, it encompasses measures designed to abolish discrimination between economic units belonging to different national
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The difference is qualitative as well as quantitative. Whereas cooperation includes actions aimed at lessening discrimination, the process of economic integration comprises measures that entail the suppression of some forms of discrimination. For example international agreements on trade policies belong to the area of international cooperation, while the removal of trade barriers is an act of economic integration. Distinguishing between cooperation and integration, we put the main characteristics of the latter--the abolition of discrimination within an area--into clearer focus and give the concept definite meaning without unnecessarily diluting it by the inclusion of diverse actions in the field of international cooperation. Economic integration, as defined here, can take several forms that represent varying degrees of integration.
Economic integration can take many forms. According to Balasaa (1962) there are four different stages of economic
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The first is a Free Trade Area (FTA), then a Customs Union (CU), then a Common Market (CM), and finally an Economic Union. Panagariya (1998, p.2; and 2000, p.288) argue that the term PTA, whether used to stand for Preferential Trade Area, Preferential Trade Agreement or Preferential Trade Arrangement, has an advantage of being wider in that it can be used to describe FTAs, CUs and arrangements involving partial trade preferences. Preferential Trade Arrangements (PTAs) 1 usually entail lower tariff barriers among participating nations than with non-member nations. Panagariya (1998, p.2; and 2000, p.288) describe PTAs as an arrangement between two or more countries in which goods produced within the union are subject to lower trade barriers than the goods produced outside the union. The trade arrangement among the eight Muslim countries of the Developing 8 Organization is an example of a PTA. A Free Trade Agreement (FTA) 2 is a PTA in which member countries do not impose any trade barriers (zero tariffs) on goods produced within the union. However, each country keeps its own tariff barriers to trade with non-members. This is usually referred to as "trade integration". A good example is the North American Free Trade Agreement (NAFTA) formed by the United States of America (USA), Canada, and Mexico in 1993. More specifically, paragraph (8) of article (XXIV) of the GATT defines a free trade area as
In conclusion, economic integration and economic globalization help reduce the probability of interstate belligerency because war negatively impacts the markets and investments, post World War reconstruction helps build stronger economies and lastly, countries would rather focus on specialization than war. In addition, economic integration and economic globalization help the economy grow and expand. These points show that war and conflict is decreasing because countries that are economically integrated prefer to free trade without any restrictions. As a result, markets increase since countries have more access to trade and that leads to an increase in globalization, whereas war would put the countries’ economies at risk.
The least advanced level is the Free Trade Area. The features of this level is that reduced tariff barriers between signatories, which at times are abandoned altogether and there is free movement of labour and capital and the non-member countries have an independent set of tariffs against member countries. The second level of economic integration is the Customs Union. This is a Free Trade Agreement plus a common external tariff. Member countries agree to reduce tariff barriers among themselves and they have in common, this is referred to as tax harmonisation.
“Institutions are essential; they facilitate cooperation by building on common interests, hence maximizing the gains for all parties. Institutions provide a guaranteed framework of interactions; they suggest that there will be an expectation of future encounters. They facilitate cooperation by building on common interest, thus maximizing the gain for all parties.” (Mingst, 2011) This theory supports the idea that if one cooperates with the other they both will gain, but once the established trust is lost between the cooperating countries, one should do whatever is in their own economic i...
The European Union cooperation all started with economic integration. Since the beginning of the ECSC in 1952 until now one of the major forces but also one of the major weaknesses of the EU has been their will for a common market and a monetary union. The single market was achieved in 1992 with the entrance into function of the Maastricht treaty. This treaty greatly influenced how states would have to deal with external border control and the free movement of the people because what the Maastricht treaty did was not only opening a single market, but also allowing people, goods and services to move freely across European Union member states. Economic integration has explained by Nevin has usually 5 level which goes from he lowest o he highest level of cooperation. The first level of integration is the preferential tariff which only allows st...
The market revolution caused the decline in small-scale production for local use into a rise in large-scale production in manufacturing. The market revolution is the expansion of the marketplace that occurred in early nineteenth century, the construction of new roads and canals that interconnected for the first time. The Erie Canal provided a successful source of transportation, states got involved and spent money into the transportation networks that stimulated economic growth. With the rise of the economic growth there comes problems. Although changes brought by the market revolution helped strengthen the United States economy, there were many effects from the market revolution that caused boom-bust cycles, class division, struggle in upward
The commercial activity has been, over the centuries, linked to human activity, due to the need to obtain satisfactory. The evolution of trade throughout history presents issues of immense importance to understand the current configuration of trade, However, for the purposes of this research we will be observing what is free trade so we can understand and interpret every point that we will be talking about in this investigation. Free Trade is an economic concept, referring to the sale of products between countries, duty-free and any form of trade barriers. Free trade involves the elimination of artificial barriers (government regulations) to trade between individuals and companies from different countries.
These “Inner Six” nations thus laid the framework for further integration of other nations within the region and its supranational principles were what led to the creation of the European Economic Community in 1957, further assimilating the European countries’ economies. The creations of these communities for economic purposes were meant to promote cooperation amongst European nations to prevent the further outbreak of violence which had subsided with the end of WWII. Through these general agreements of economic importance came further integration through the creation of more agreements throughout the 1960s, such as the abolishment of customs duties amongst their borders, creating free trade and border trade tax pacts among the Inner Six and across their borders to other signatory nations.
NAFTA is trade agreement implemented January 1, 1994 between the U.S., Canada and Mexico which removes restrictions on trade between the three countries to encourage free competition, improve investment opportunities and increase market access "for small and medium-sized enterprises (SMEs)" (Tomasetti, H., 2004). Some of the advantages NAFTA has afforded its members are the eradication of tariffs, product price reductions and increased profit margins. NAFTA has eliminated tariffs on all goods traded betw...
Economics is an ever-changing field of study. Within that area of interest, there are many people who have influenced the world with their individual economic point of view. Some of those people have made a fundamental impact upon not only the United States of America, but also upon the world. Adam Smith, David Ricardo, John Maynard Keynes, Friedrich Von Hayek, Milton Friedman, and Fengbo Zhang are six men who have accomplished just that. Their opinions, actions, and words have forever changed the world of economics.
Neo-functionalism is a theory initially proposed by Ernst Haas during the 1950s in response to the creation of the ECSC (Bomberg, 2008: p11). One of the main ideas in the neo-functionalism theory is the concept of the “spillover”, where, “integration triggers endogenous economic and political dynamics leading to further integration” (Majone, 2005: p42). In other words, integration in one area, can in itself can cause further unintended integration in another area, even if the individual nation states are reluctant to integrate (Fligstein et al, 2012: p106). Therefore neo-functio...
In order for international trade to work well, governments must allow the world market to determine how goods are sold, manufactured and traded for all to economically prosper. While all nations may have the capability to produce any goods or services needed by their population, it is not possible for all nations to have a comparative advantage for producing a good due to natural resources of the country or other available resources needed to produce a good or service. The example of trading among states comprising the United States is an example of how free trade works best without the interve...
The case for regional integration is both simple and irrefutable. First we are small and we need to achieve economies of scale. We need to achieve such economies in markets, production, the mobilisation of regional capital for regional use, university education, science and technology, sea and air transport to mention some areas.
According to Hill, regional economic integration refers to "agreements among countries in a geographic region to reduce, and ultimately remove, tariff and nontariff barriers to the free flow of goods, services, and factors of production between each other." The prevailing economic argument for regional economic integration is that it creates economic synergy by allowing each country to focus only on what it is most efficient at producing.
Regional economic integration enhances political cooperation. Several group of nation can have significantly greater political influence than each nation would have by individually. This integration is an essential strategy to address the effects or issues of conflicts and political instability that may affect the region. Improved political cooperation due to regional economic integration is also useful tool to handle the social and economic challenges associated with globalization. Countries which are link together will be more dependent on each other that will reduce the likelihood of violent conflict between each nation. This integration will also give countries greater political clout when dealing
Regional integration is the process by which two or more states agree to cooperate closely together to achieve peace, stability and wealth. Usually, integration involves one or more written agreements that describe the area of cooperation in detail, as well as some coordinating bodies representing the countries involved.